Over the last 12 months i’ve spoken to many VCs, corporates and entrepreneurs about corporate innovation. I gathered my talking points and thought i’d summarize them in a post:
What your business. What’s your goal
If your company is working in a high barrier, highly specialized industry and has a specific area they want to focus on – consider a corporate incubator.
If you want to broadly look at what’s out there and can potentially disrupt your business or if your operating in a low barrier to entry environment such as software or security – you might want to consider tapping into the startup community.
Transportation and banking are examples of industries where incumbents have changed their approach following the reduction in barriers; Citi, Wells Fargo, BMW, Totoya and HSBC have all established CVCs and corporate accelerators to tap into the startup community.
Your biggest asset – customers
Corporates often think their biggest asset is their capital or access to resources. Wrong ! Their biggest asset are their customers. Every entrepreneur will tell you that getting her first customer was way more challenging than raising funds. The umbrella or a large corporate can reduce risk and convince clients to take a leap of faith in a company with no refernece clients.
How to work with startups
I’ve spoken to dozens of corporate accelerators. Every few bring value. Most are innovation theaters. They offer a venue the executives can visit, spend a few hours tasting a glimpse of innovation and go back to their daily tasks. Few startups i spoke to mentioned attending a corporate accelerator as a valuable experience.
Whether you plan to establish a corporate accelerator or a Corporate VC – Hire outside people. It’s a closed network and hiring people from within can significantly reduce the learning curve. They will have access to the right opportunities and find a way to personally bring value. A corporate VC (CVC) is a good yet expensive way to tap into the startup ecosystem. Unless you are Google, Intel or SalesForce, funds will be your tax to “play” in the ecosystem. I’ve written quite a few posts about CVCs, the investment decision process etc.
I started four new businesses inside companies so this comes from personal experience: I’ve see more than a few companies form internal incubators with 30-40 employees. While these are great retention tools and something to talk about during “all-hands” meetings, it rarely creates a new business. The skills required to start a new business are different than the skills required to come up with an idea. By nature entrepreneurs don’t work in large corporations and if you are lucky there might be a few folks (4-5) that for one reason or another decided to stay. If you start a corporate incubator have specific needs you want to target. Carefully vet the right employees or hire successful entrepreneurs with domain expertise. Separate the team from the company for a period long enough to get somewhere (6-12 months). No mandatory corporate meetings, no shared P&Ls etc.